It was an idea that inspired a doctor to walk out of his practice. Dirk Koekemoer, the founder of biomedical engineering company eMoyo, spent the next 18 years building a device that helps tens of thousands to hear – all they have to do is sit under a tree and listen.
&#8220;It was 1999, I literally sat in practice and realized this is going to go on forever. I was going to see 30 patients a day for the rest of my life. I wanted to be able to treat thousands. I cancelled all my appointments that day and took the bold move to start a company,&#8221; says Koekemoer.
It cost Koekemoer $1.2 million and saw the birth of the KUDUwave, a mobile audiometer that looks like a set of headphones. Its size and the fact you can use it under a tree made it a game changer.
&#8220;A basic sound booth, at minimum, would cost R35,000 ($2,600). They can be the size of a fridge and are good for screening. But, the moment you want to do proper audiology the booths go up to R250,000 ($18,700). Then the moment you look at mobile audiology you need two booths on a mobile trailer, with a 4&#215;4 and on a heavy trailer. You are looking at costs of R500,000 ($37,000).&#8221;
The R65,000 ($4,800) headphones are cheap and smart. They won’t operate unless the conditions are just right. One of the best places to use them is under the shade of a tree, just as well as Africa has plenty of them. They are used in the rural areas, like Zambia, where audiologists need to get around.
&#8220;Open air testing, in an area with open windows or under a tree, is the best for ear testing. A booth needs ventilation, it needs soundproofing and probably doubles the costs.&#8221;
&#8220;There are 3.5 billion people in the world that don&#8217;t have access to adequate equipment. I thought let&#8217;s create devices that can actually do the tedious things that a doctor and a nurse have to do that don&#8217;t need brainpower,&#8221; says Koekemoer.
According to the World Health Organization (WHO), 360 million people have hearing loss and most of them live in low- and middle-income countries.
&#8220;It&#8217;s a huge need. There are 30 million people in this country with hearing problems, 2 million need hearing aids. There are not enough audiologists and there are not enough facilities,&#8221; says Koekemoer.
&#8220;Hearing loss is a serious problem. It causes dementia and depression. Also isolation, especially in the elderly; literally their life expectancies shorten if they are unable to hear well.&#8221;
In Khayelitsha, a township 28 kilometers south east of Cape Town, this is a common challenge. This is also where we follow Koekemoer to meet with head audiologist Shireen Martin, of the Khayelitsha Hospital, who has been working with the device since July.
Koekemoer’s device has transformed the way audiologists, like Martin, work. Employed by the South Africa’s Department of Health, Martin uses the device to test patients’ hearing loss in multi-drug-resistant tuberculosis (MDR-TB).
&#8220;At first I was against the idea. I think there was a lot of speculation about it. It has to do with changing the way people work and think. I was used to sitting in a booth, sitting with a patient one-on-one. It kind of made me adverse to the idea of a mobile audiometer.&#8221;
The department employs decentralized TB treatment, which means Martin needs to travel to treat patients.
&#8220;I don&#8217;t have access to any other audio equipment. With many TB clinics that decentralized their treatment and initiation of MDR-TB, many patients are not able to go to an audiologist, with them being so far away,&#8221; she says.
Martin is the only audiologist who operates here and sees up to 60 MDR-TB patients a month.
&#8220;[Patients] do appreciate it. Because it is not far away from home, they don&#8217;t have to wait long for transport to take them to far-away hospitals. Bringing the service to them is the importance of primary healthcare, not just audiology.&#8221;
MDR-TB patients need to be monitored carefully. Hearing loss can be a side effect of the drug used to treat the disease.
&#8220;Some can lose their hearing in as short a space as a month,&#8221; says Martin. &#8220;It&#8217;s devastating, especially if it happens in a short space of time. That&#8217;s why counseling is very important; so patients know what the early signs are and the importance of them coming back.&#8221;
Koekemoer believes Martin&#8217;s work is a mere drop in the ocean, considering there are 20,000 MDR-TB patients in South Africa and the disease is very infectious.
&#8220;It&#8217;s scary. Patients can&#8217;t just jump into a taxi with their disease. They need special transport. It’s why it makes sense that the audiologists go to them,&#8221; says Koekemoer.
Koekemoer&#8217;s dream started on an even grander scale – a full mobile body scanner. It was a eureka moment in his small home office in Pretoria.
&#8220;One night at two or three o&#8217;clock in the morning, I was sitting at my desk and I started drawing a picture. It was a horrible picture. It was a full solution on how to examine a patient as good as a GP would examine a patient. Things you had to put on a patient. It wasn&#8217;t like the Star Trek scanner version you see in movies, but we are getting there,&#8221; says Koekemoer.
Koekemoer has learned the business of building medical equipment is tough.
&#8220;In 2001, when I started developing these medical devices, it was so difficult. Voice over IP wasn&#8217;t even legal then. In that type of environment, it was difficult just to find information on audiometers. At that stage I was doing deep searches on university FTP sites. I had to invent my own software to actually find the information. Now it&#8217;s easy. The rate of inventiveness increases significantly.&#8221;
Patents are expensive. According to Koekemoer a single patent costs R1 million ($75,000), and a further R500,000 ($37,000) every year after. It still doesn&#8217;t protect your devices; poached product designs are common. It can be as simple as changing a small part. Koekemoer says that in the field the headphones have a two-year advantage before similar devices appear.
&#8220;The problem is KUDUwave had got about 16 patents. It&#8217;s better to take that money and get first-mover advantage. If I can give any advice to any entrepreneur, just give up on thinking you are going to protect yourself on patents. Just get the flipping thing in the field.&#8221;
&#8220;You need to be fast, constant improvement and add additional things to the KUDUwave. In the next few days we are adding a crosscheck that will allow calibration of the device in the field.&#8221;
Next is getting the product certified. With huge backlogs worldwide, inventors struggle to get their products on shelves. The process can add years of painful delay. The South African Bureau of Standards (SABS), the governing body which approves devices in the country, has no facilities to test the device as it is so unique.
&#8220;We need alternative European certification which can take five months just to get a quote for audit. It is really difficult to say no every day and not go to the US, where it is so easy to get FDA (Food and Drug Administration) approval. FDA registration doesn&#8217;t count in South Africa, but it’s accepted in the rest of the world,&#8221; says Koekemoer.
Despite the uphill battles, Koekemoer is adamant that Africa is the place where his device can make the most difference.
“Re-engineering healthcare, that is what we are doing.”
So, when you see a patient with a set of headphones on while sitting under a tree, chances are they are taking a test that could change their lives.

Huh? Say That Again?

George Tafaria Waititu lived what many would describe as a life of a king. As the Managing Director of Ipsos Synovate, an international research company, he had power, influence and money. In June 2011, Waititu quit to pursue a childhood dream. Tired of building other people’s dreams; he decided to build his own – literally.
Waititu owns Tafaria Castle and Country Lodge in the Aberdare Range – 224 kilometers north of Nairobi. He went back to his childhood village with one aim – to conquer the brutality he experienced when growing up.
“The castle is supposed to transform my village from a dark age to a more enlightened age, similar to what happed in medieval times. This place molded my character and made me the person I am today. It is desperate for help and development,” says Waititu.
The castle, with medieval architecture, cost him $3.5 million to set up.
“I could have chosen to get into the lucrative real estate sector in Kenya and by now my return would have doubled,” he says.
Three years later, the investment has paid off.
Building it was a labor of love. After four years, he was able to open its doors in September 2012. Seventy percent of the construction was done by locals.
“People just need to be inspired, guided and supervised,” he says.
Along with roads and power, Waititu created employment and a market for locally-grown produce. The area’s development has also resulted in the value of land skyrocketing.
It wasn’t always easy; the project stalled several times due to a lack of resources. Waititu had to negotiate with his neighbors for land and water. Heavy rain also made it difficult to access the area before Waititu invested in a proper road.
He is proud of the transformation he has brought to his village. He is even prouder of the skills the villagers have gained.
“The rains can come and wash away the roads but the skills they acquired can never be taken away from them.”
Waititu aims to make Tafaria a model village and guide the development of the area.
“I don’t want to change the rural life. I just want to improve it without changing its rural setting.”
The source of Waititu’s inspiration can be found in his childhood. His mother moved to Aberdare from a crowded colonial village in Nyeri, central Kenya. Unlike the lush and fertile highlands of Nyeri, Aberdare is dry and hot.
The family lived in the bush, along with wild animals that roamed freely. They would wake up in the morning and find animals had ravaged their farms and killed people.
“The first funeral I attended was of a neighbor who was killed by a buffalo on a farm.”
Waititu remembers two serious droughts, forcing the family to survive on donated yellow maize.
“These things molded my character. That upbringing made me a risk taker.”
When he visited his family in other towns, Waititu’s eyes were opened. He saw vehicles, electricity and other amenities which he craved. That is where the seed of transforming his village was planted.
“I did not desire to leave my home; I desired to make it better.”
With the castle he built there, Waititu has achieved his lofty goal.

From Villager To King Of A Castle

Kerryne Krause-Neufeldt was on a roll. She founded her first beauty product business at 23 and was turning over $45,000 in the dying months of her company. But she lost it all on her worst day.
“I never thought in my wildest dream that anybody would steal my company from me. Seriously, how would they get that right?” she says.
Born in Pretoria, she was raised by a single mother who ran a hairdressing salon.
Krause-Neufeldt worked odd jobs while paying her way towards an Honours degree in marketing at the University of Pretoria. From working as a sales lady at a small outdoor store, she packed her bags and left for London on a two-year working visa, to toil for a sandwich making store, Pret A Manger. She was training to be a manager for one of the stores the company was going to launch. It was here that she learned how a well-oiled, structured company functioned. But after three months, she returned to South Africa on the promise of a job.
“The difference in having worked for Pret A Manger in London and coming back to work for this company was a culture shock of note and it was a defining moment for me. I realized there was no vision. I was never going to see this marketing position,”
she says.
She resigned after five weeks and decided to start her own business – a distribution company, supplying cheap eye masks that rejuvenated the skin and removed puffiness. She called up the principle office for the eye masks in Switzerland which did not have a market in Africa.
They offered 10,000 eye masks to sell in South Africa but Krause-Neufeldt needed funding to start this business. One of her mother’s customers was a lawyer who dabbled in business from time to time. He wanted to start his own business but Krause-Neufeldt convinced him that her business idea was more viable. But he wanted 51% of the business.
“He knew I was caught between a rock and a hard place. He said, ‘I’ll give you the money but its 50/50 for the business,’ and in that moment I was relieved I could get started on the business but somehow I knew it was the beginning of the end,” remembers Krause-Neufeldt.
The lawyer funded the first 2,000 units. She hired around 12 sales reps and did all the training and focused on the administration. She also hired Peggy, her best friend, who would distribute the units to the sales reps from a factory. The sales reps earned commission on all the stock they sold, while she earned a mere salary of $275, which she felt was too little.
Business picked up and more stock was brought into the country and South Africa became one of the biggest markets for eye masks.
After running the business for close to two years, Krause-Neufeldt told her business partners that they had to inject more money into it to meet their side of the deal. They were reluctant and felt she was becoming a problem.
Then, at peak season during November, three of her sales reps picked up units worth $91,000. Peggy counted the stock and gave it to the sales reps. They should have delivered the products and returned with the cash, but they never came back.
When Krause-Neufeldt approached her business partners about it, they said that the sales reps gave them the money and that they were investigating her for fraud.
“I asked them how much the reps were giving them and they said R30,000 ($2,740). I said they have R1 million ($91,000) worth of stock. I told them they were getting nailed, but I was the enemy,” she says.
Her boyfriend was a director in the company.
“I was fighting with my boyfriend at the time and I told him he can’t be playing golf all day and take a salary. I told him to do something and he said he’d be a sales rep.”
While in a meeting a few days later, the partners asked Krause-Neufeldt’s boyfriend whether he was earning commission. According to the contracts, it was illegal for directors to earn commission as part of their pay package unless the board of directors approved it.
“We went into a meeting and that’s the only dirt they could find on us,” says Krause Neufeldt.
The partners said they were going to open a criminal case against her and the boyfriend unless she signed over her shares and released the company to them. She tried to get lawyers in but had to fork out around $3,600 upfront. Krause Neufeldt couldn’t afford this with her small salary.
“I signed my shares for nothing and handed my company to these people. I didn’t have a choice in the matter,” she says.
Krause-Neufeldt lost everything. She also signed a restraint of trade agreement. She lost her distribution agency and a local market she had personally grown.
“It was the biggest trauma of my life. To be betrayed by everyone and you know I’d get calls from salons that would complain about my reps and I wouldn’t believe them. I lived for my staff. It was devastating.”
Krause-Neufeldt, however, refused to lie down.
“I just believed failure was the inability to get up again. So I resolved to get up the next day and start another company to show them,” she says.
She immediately started working on her next business, I-Slices Manufacturing. She had come across an Italian eye mask but it wasn’t in line with the quality she wanted. So she decided to develope her own product.
She needed the technology that would make the base of her product, Eyeslices. A friend introduced her to the Council of Scientific and Industrial Research (CSIR), a research and development organization. Here she found the department that worked on a hydrogel treatment pad for burn wounds but the idea was shelved in 1993 because it couldn’t be developed further.
One day, Krause-Neufeldt met Avie Kruger, a scientist who had worked in the CSIR polymer department, and helped her to develop her products.
She started her own laboratory in a cottage on a plot in Midrand, outside of Johannesburg, but there were no standard manufacturing methods or equipment available to produce the product she wanted.
Her mentor suggested she look into the food industry and she came across a machine which had oval cut outs, similar to those of Eyeslices. She contacted Ulma Packaging Solutions, a company that packages products such as yoghurts and meat. The next morning, they arrived at the cottage and started to help Krause-Neufeldt customize her machine.
It took about one and a half years to create the perfect Eyeslices products following the seven years of research. Today, Eyeslices is a reusable stable water-based hydrogel eye mask manufactured through a physical process of freezing and thawing.
Instead of placing cucumbers on your eyes, Eyeslices does that job better and it’s a product many beauty salons have stocked on their shelves.
The United States was I-Slices Manufacturing’s first distribution country. Today, the company boasts 19 other export markets including and hopefully followed by Morocco, Kenya and Nigeria.
Krause-Neufeldt says the challenge with exporting products on the continent is that Africans want brands to be successful in the overseas market before they buy. Regulations can also be a problem.
“Every single country in Africa, the regulations are different and they’re very onerous. They’re incredibly expensive,” says Krause-Neufeldt.
But she is not giving up just yet, she plans to grow the product and take it to many countries on the continent. She hopes it will be one in the eye for cucumbers.

‘I Never Thought Anybody Would  Steal My Company From Me’

People often say “life is short” as a justification to do or buy something immediately rather than waiting. But the truth is, life is not short. Life is long. The average life expectancy for an American male is 76.2 years, and 81 years for a female. A thirty-year-old discussing a short life may actually be looking at another 50 long years.
This is good news! And, financially speaking, a long outlook on life is important, because the decisions we make early on have a significant impact on the remainder of our lives. Specifically, these decisions can make or break our retirement plans.
Here are seven important financial decisions 30-year-olds make that could come back to haunt them in their 50s:
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<h4>The company you work for</h4>
There are many things to consider when choosing a job, but the retirement benefits offered are vital to wealth-building in the long term. A 30-year-old who doesn’t carefully research his or her benefits and chooses to work for a company with no company match or retirement contribution could  be way behind someone who works for a company with robust benefits. For example, a 30-year-old making $75,000 a year who saves 10% of his or her income in a 401(k) and earns an 8% average return would have a balance of just under $600,000 at age 55.  Compare that to a 30-year-old who saves 10% at a company that matches 5% and adds a profit sharing contribution that averages 5% a year. He or she would have almost $1.2 million in their retirement account – double our first example’s amount – at age 55.
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<h4>Your starting salary</h4>
Even a slightly higher starting salary can jump start your earning potential. A study by George Mason University and Temple University showed that employees who negotiated their starting salaries averaged a $5,000 increase compared to those who didn’t negotiate. Due to the effects of compounding, the researchers estimate that an employee who starts his or her career with a salary of $55,000 instead of $50,000 (with 5% increases each year) would earn over $600,000 more in income over a 40-year career.
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<h4>Your choice of a partner</h4>
Who you marry is one of the most important financial decisions you can make. I’m not advocating you marry for money – quite the contrary. Marrying for love and staying together is a smart financial move. Whether the 50% divorce rate is an accurate statistic or not, we can all agree that when it happens to you, it is devastating both emotionally and financially. The divorce itself can be expensive and dividing financial assets unravels your financial planning. Just ask Robin Williams, who is returning to television after two expensive divorces!
Your choice of a mate isn’t only about love and commitment; it’s also about financial compatibility. If you and your partner are compatible money-wise and commit to setting up a financial plan to save, invest and build your future, you can enjoy life and create financial security at the same time.
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<h4>When you have children</h4>
Americans are delaying having children. In fact, according to National Health Statistics Report, more than one in three college-educated women will have children after the age of 30. In the past few decades, the average age of American first-time mothers has increased by four years, and first-time fathers are aging at the same rate. Since the recession in 2008, the only age group that has continued to have more babies than in years past is the “over 40” group.
In Sheryl Sandberg’s book, Lean In, she encourages women not to pass up promotions because of plans to have children. If you have plenty of support at home, this can be a great idea. Another way to look at it is, if you plan on having children, don’t wait because you are focusing on your career or waiting for financial security. There are advantages to having children earlier.
One reason has to do with timing of kids’ expenses. Consider a couple that has children when they are 25 years old. Before they hit their 50s, their kids are past the very expensive college years. These parents, still young themselves, have 15 years to focus on their own retirement savings if they plan to retire at 65. Couples that have children when they are 35 years old may not see the light at the end of the “empty nest” tunnel until they are 60 – much closer to retirement age.
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<h4>How you invest</h4>
Investing in high-cost managed accounts can take a heavy toll on investment returns over time. According to Forbes contributor Rick Ferri, founder of Portfolio Solutions, those fees can add up to 40% of your return each year. Rick shares an example of how, with annual mutual fund management fees of 1.1% and an additional advisor fee of 1% (on the first $1 million of your assets), an investor trying to squeak out a return of 5.3% (the expected return) of a portfolio of 60% global stocks/40% U.S. bonds could actually pay 40% of that return in fees. Make sure you weigh the long-term impact of fees when investing; consider choosing low-cost mutual funds or index funds for retirement savings.
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<h4>Whether you rent or buy a house</h4>
There are instances when it is better to rent than to buy a house. If you need mobility, don’t plan on staying in your area for long or aren’t interested in potentially being a long-distance landlord, you may be better off renting. However, in the long term, owning your home can be a coup for pre-retirees. Without even taking home equity into account, a homeowner with a fixed-rate mortgage won’t have to worry about a rent increase. Having a fixed housing cost is increasingly important as you get older, since rents can increase with inflation and you are attempting to estimate future expenses. As a homeowner, the mortgage will eventually be paid off and your housing budget will only have to cover taxes and repairs, so there may be more money to enjoy during your retirement.
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<h4>How you pay attention to your dollars</h4>
If I could take back what I spent in the past twenty years on coffee, clothes I bought on sale but rarely wore and my “guilty pleasure” books, I’d be a wealthy woman. Tracking expenses to see where your money is going which you can do with your bank, Quicken, or in the LearnVest Money Center (*disclosure – I work for LearnVest Planning Services) and identifying blind spots can help you save more and spend less. First of all, when you are tracking expenses, you have a heightened awareness of your money and subsequently are more reluctant to part with your dollars.
I hear clients exclaim all the time, “I had no idea I spend $600 a month on restaurants (or $800 a month on shopping). I am shocked!” When tracking, you can more easily identify areas for cost savings and put those savings toward your financial goals.
Mickey Mantle said, “If I knew I was going to live this long, I’d have taken better care of myself.” I suggest that if 30-year-olds knew just how young they’d feel in their 50s and how much life is left to live, they’d take much better care of their finances.
Life is long. Make decisions accordingly.

7 financial decisions made in your 30s that may haunt you in your 50s

It all started with an article in Forbes 14 years ago. Steven Kark was paging through the magazine when he was struck by an epiphany. The article was about three businessmen in the United States who were raking it in through the automated teller machine (ATM) industry. Couldn’t he be a millionaire too?
Kark was 25 at the time, fresh out of university, had just married and found a new job. It made more sense to stick to this steady job but the article lit an entrepreneurial flame in him that refused to go out. He wanted to know more about the industry and bring it home to South Africa.
It wasn’t a spontaneous decision, he mulled over the idea for about a year, before he took the risk. He quit his job, booked his ticket and was off to the States. He spent almost a year there, absorbing all he could about the payment services industry, meeting manufacturers and securing contracts. Kark then bought a cargo container loaded with 23 machines and headed for South Africa. When he arrived, contract in hand, he had no clue how he would pay for the cargo, or even who he would sell to.
“In South Africa banks were wholly responsible at the time for putting in ATM machines. If convenience stores like ‘Seven Eleven’ or ‘Kwik shop’ or a ‘BP Express’ wanted an ATM [they] were totally reliant on [the] bank to put in an ATM,” says Kark.
False promises from investors forced Kark to turn to family and friends. But that wasn’t the only curve ball coming his way. Their first deal with a bank went south.
The bank in question was Saambou. The year was 2002, which saw a dramatic collapse of the bank.
Growing distrust about one of the bank’s directors led to a bank run, as rumors of the bank going under spread, it soon closed down, failing to meet the demand. It was liquidated and bought by one of South Africa’s biggest banks, First National Bank (FNB).
“That was our Black Friday actually. We had all these machines, we were really flying. All those machines were under Saambou [and] it went south. In the end we [made] a deal with Absa, they were quite ready to step into Saambou’s shoes… and today they are fantastic partners of ours,” says Kark.
Today he is the co-founder of Transaction Capital, listed in June, valued at R4.7 billion ($576 million). Transaction Capital wholly owns Kark’s three sub companies, installing ATM machines and dealing with electronic payments. Although the business is diversified, Kark treads carefully.
“We work in close collaboration with the banks today, which are expanding their footprint. If you’re going to push north outside of South Africa, you need to do it in absolute collaboration with a like-minded bank,” says Kark.
Paycorp—previously called ATM Solutions—is the subsidiary that is taking Kark north. It has more than 4,500 independent machines in South Africa and 200 in Namibia and installs at least one-a-day in shops from Cape Town to Windhoek. The fruit of 12 years of business, which has been anything but smooth.
“It was all hands on deck, I used to install the ATMs; I used to sell [them and] cash them myself. But our first time in Durban [I remember] we couldn’t offer a ‘Cash-In-Transit’ vehicle… We helped one retailer load his machine. We would go there every single morning, his wife would come out with cash hidden under her clothes and he would leave us in the back room and we would sit and load up the machine. It was unbelievable stuff, it was fascinating,” says Kark.
This industry is not for the faint-hearted. It is plagued with fraud, robberies and the infamous ATM bombings.
According to the South African Police Service Crime Report 2010/2011, there was a 61.5% increase in ATM bombings from the 2009/2010 to the 2010/2011 financial year. This after a 10.2% decrease from 2007/2008 to 2008/2009 as well 36.2% decrease from 2008/2009 to 2009/2010 financial year.
“It happens to us but certainly a lot less frequently than it ever has been. If it’s not bombings it’s something else, it’s a continuous battle where criminals will think of new and innovative ways to get their hands on your money… You need to try as best as you can to stay a step ahead,” says Kark.
One of the legacies of the ATM is that more people are using them, from cities to villages. It appears to be good for business.
“Where things are a bit geographically removed, you would find that there is a phenomenon of capital flight. If they work in town X and they live in town Y and Y doesn’t have an ATM, they would spend all their money at X. So if you put a machine where people live [they] have the ability to spend. It makes sense for everybody, there’s business for us, the community benefits, the retailer benefits and our partner banks get additional reach into those areas,” says Kark.
In fact, half of the ATMs installed in South Africa are in the villages. Little do people know, they sprang from an idea formed while paging through Forbes magazine.
Kark has framed that article, so he should, it helped make him a fortune.

I Want To Be A Millionaire…  So Fricking Bad

He tells his investor relations teams to discourage “the wrong kind of investors”, wants more global environmental regulation and taxes and believes that companies have an overwhelming responsibility to their supply chains. Sunny Verghese has an unusual outlook on business.
The Olam CEO has overseen the remarkable growth of the agricultural producer and processor from a sideline operation in Nigeria to a global business spanning 65 countries. The company’s success has come in part by turning social responsibility into a competitive advantage, making a solid business case for the kind of social investment that is only now finding its way into mainstream corporate culture.
Olam began with modest goals in 1989 as an offshoot of the Kewalram Chanrai Group, which had been operating textile factories and cotton spinning operations in Nigeria since the 1960s. When the oil price slumped in the late 1980s, the country began to suffer from an acute shortage of foreign exchange, and businesses struggled to find hard currency to buy inputs and spare parts. In response, the Kewalram Chanrai Group looked for a sector with quick export potential. They began with cashews, and expanded from there.
“When we looked at what was required for us to win in this business, it became evident that the large players were already very well entrenched and we were late to this game,” Verghese says from the company’s Ivorian headquarters in Abidjan. Despite the fragile political situation in Côte d’Ivoire over the past few years, Olam has continued to invest, opening the world’s largest automated cashew processing factory in February in the northern city of Bouaké.
In the late 1980s and early 1990s, the industry was undergoing huge change, as West African economies liberalized and broke up the state monopolies overseeing their commodity exports. The cocoa and cotton boards disappeared and were replaced by a fragmented, poorly structured industry of traders and license-buying agents, who had previously bought at the farm gate on behalf of the government. The rules of the game were changing, and Verghese saw an opportunity to take on the existing players.
“[Before] they could sit in London or New York or the major commodity trading hubs and source their raw material from the government monopolies, without really having to come here, dirty their hands or manage the emerging market risk,” Verghese said. “When the government monopolies started dismantling and disappearing, they started facing significant counterparty risk issues.”
The new traders were not able to manage pricing risk, so when the markets turned against them, they would default, leaving international customers without supplies.
“It was difficult for the customer overseas to come and enforce his contractual obligations in these markets. So counterparty performance and forward selling premiums became big issues under those circumstances,” Verghese explained.
“That’s when we realised that we had a significant opportunity to develop supply chain infrastructure and build counterparty credibility that was very high, so that in other countries, given the volatile pricing environment, we were still able to deliver reliably on a contract.”
Olam thrived in the new African markets, spreading across the continent and into major commodities, such as rice, cocoa and cotton and in niche products, like cashews. To do that, he explained, “we started at the origin and we resorted to buying at the farm gate, or as close to the farm gate as possible.”
But this was only part of the struggle. Creating supply security meant building loyalty and improving the lots of the smallholders that make up the majority of growers.
“Buying from the farmer directly, helping him improve his productivity, providing him [with] microfinance—in terms of loans—or agricultural inputs and market access, helping him to upgrade the quality he was producing, allowed him to dramatically raise his income and his livelihood, and therefore become a loyal supply partner for us.”
Verghese talks in terms that are becoming common in emerging markets and agribusiness. Companies, from brewers to traders, have begun to articulate what the Olam CEO calls “mutuality” to their investors and shareholders.
The reasons, he says, are relatively straightforward. Beyond it simply being “the right thing to do”, being welcomed into a country and being sensitive to its context is fundamental to being able to work there unimpeded.
“We believe in emerging markets it’s relatively easy to get a license to operate from the government but it is tougher to get a license from the community to operate in those markets,” he says. “You can only build a sustainable business in these markets when the community gives you license to operate. If they see you as a foreigner, as an exploiter of their resources, as not adding any value, they don’t want you there.
The growing trend towards consumer activism and responsibility has added momentum to the requirement.
“Our customers, like Nestlé or Unilever, in turn have demand from their consumers who are not satisfied in snacking on a bar of chocolate or drinking a cup of coffee without asking searching questions about where this coffee or cocoa is coming from. Is there any child labor involved? How environmentally sustainable is the supply chain for this product being used in their chocolate or their coffee?”
The company is creating its own “Olam standard” of sustainability, and is in the early stages of an environmental footprinting exercise to work out the carbon impact of its individual products and supply chain.
Verghese can rattle off statistics about the threat that climate change poses to the world’s population, and the links between global energy, water and agricultural supply. He talks about the water requirement per kilogram of meat in the same terms that most CEOs talk about their financial statements. His sense that there is an imperative to act, despite the high cost, is strong, although he acknowledges that to do so alone risks unilaterally imposing a drag on the company. The competition could gain short-term advantage by avoiding unlegislated “obligations”.
“It’s a catch-22 situation,” Verghese says. “We believe that the long-term solution is that carbon should be priced and carbon should be taxed because you cannot influence behaviour if that is free.
“I think stakeholder pressure will intensify to a level where everybody will have to comply with the minimum standard. So we are taking the view that it is the right thing for the sustainability of our business so we should do the right thing here, because if you want a business that is enduring, then we can’t take [that] view.”
The issue of “enduring” business, and the kind of long-term view that encourages corporate responsibility, is difficult in the current funding environment. Olam listed on the Singapore Stock Exchange in 2005 and the demands of “typically transient” shareholders with short-term investment horizons frustrates the strategist in Verghese.
“When we are investing in plantations, say a rubber plantation, the first yield is [after seven years]. The first maturity is [after] 12 years. The cash flow break-even is in 14 years,” he said. “As a CEO there is very little incentive for you to think that far ahead, because analysts are looking at the next quarter and getting upset if you [deliver] below expectations.”
“The problem with the current capital market structures and CEOs and their time horizons persuade people to be very short-term in their outlook.”
Despite this, he has no intention to change tack.
“I tell my team your job is not to go and market the company, your job is to go and de-market the company,” he said. “You have to tell them ‘are you sure you want to invest in us? Because here is the deal: we’re going to be cash flow negative for five years’. Most people would fall off their chair.”
Continuing with the heritage of the company’s early days and trying to improve its footprint “from seed to shelf” is going to become a competitive advantage all over again, as best practice in sustainability becomes more widespread and pervasive.
“One of the reasons why we have succeeded is the way that we have innovated our business model,” he says.
“We feel that benchmarking best practice is an important first step, but is lousy strategy, because at the end of the day, everybody is trying to follow best practice, so if you achieve that goal, you will at best be at the middle of the pack.
“You can never be a leading company, or a very successful company, by just being middle of the pack. If you want to be exceptional, you need to create the next practice.”

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